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The Last DVD Format War?
Case AnalysisBy
Team 1Sheikha Al-Barwani
Jacek KilianPablo Vich Salas
Ashish Tandon
Strategic Management of New TechnologiesProfessor Rob Anthony
AgendaCase summaryKey assets frameworkCase Question 1Case Question 2Case Question 3Case Question 4Case Question 5Summary
Q&A
Case SummaryOverview of the 5 year DVD format war
between HD-DVD and Blu-ray.
The war was due to the the members of DVD forum failing to unify their standards and reaching a consensus on the next generation technology.
DVD Forum (2003)Blu-ray Camp HD-DVD Camp
Film Studios Disney, Fox, MGM, Sony Pictures
Universal
Paramount and Time Warner Bros.
Video Game Console Sony Microsoft
Video Game Developers
Electronic Arts, Vivendi Universal Games
N/A
Retailers Wal-Mart, Target, Best Buy
Movie Distributors e.g. Netflix, Blockbuster
PC Sony Toshiba
* Only covered for market leaders
DVD Forum (2008)Blu-ray Camp HD-DVD Camp
Film Studios Disney, Fox, MGM, Sony Pictures, Time Warner Bros.
Dreamworks, Universal, Paramount
Video Game Console Sony Microsoft
Video Game Developers
Electronic Arts, Vivendi Universal Games
N/A
Retailers Wal-Mart, Target, Best Buy
Movie Distributors e.g. Netflix, Blockbuster
PC Sony Toshiba (discontinued production)Result => Blu-ray won the battle
Competitive environment for the DVD standards war
Evolution technology: When the new technology is compatible with the old.
Revolution technology: When the new technology is incompatible with the old.
RIVAL EVOLUTIONS
RIVAL EVOLUTIONS
RIVAL REVOLUTIONS
RIVAL REVOLUTIONS
REVOLUTION VERSUS
EVOLUTION
REVOLUTION VERSUS
EVOLUTION
EVOLUTION VERSUS
REVOLUTION
EVOLUTION VERSUS
REVOLUTION
COMPATIBLE INCOMPATIBLE
COM
PATI
BLE
INCO
MPA
TIBL
E
TOSHIBA HD-DVD STANDARDSTOSHIBA HD-DVD STANDARDS
SONY BLU-RAY
STANDARDS
SONY BLU-RAY
STANDARDS
The organization key assets framework
INTELLECTUAL PROPERTY RIGHTS
ABILITY TO INNOVATE
FIRST-MOVER ADVANTAGE
CONTROL OVER INSTALLED USER
BASE
BRAND NAME AND REPUTATION
MANUFACTURING CAPABILITIES
STRENGTH IN COMPLEMENTS
In-house installed base of content
consumers
Dependence on outsourced installed
base
Patent protection for the technology
Patent protection for the technology
Patent protection for the technology
Patent protection for the technology
Launched in 2006Launched in 2006
History of innovationHistory of innovation
Strong manufacturing base
Strong manufacturing base
Content and technology within the same corp
8850 Billion ¥ brand8850 Billion ¥ brand
History of innovationHistory of innovation
7500 Billion ¥ brand7500 Billion ¥ brand
Technology with Toshiba, content outsourced
Strong manufacturing base
Strong manufacturing base
Launched in 2006Launched in 2006
Blu-RayBlu-Ray HD-DVDHD-DVD
Q1: Was it inevitable that only one DVD technology could survive?
Why did it not work out for both formats?
Could it have been different?
The influence of movie
studios on the data-carrier
industry
Time Warner’s
decision to no longer
sell movies in both formats
Marketplace dynamics
as a industry driver
• Consensus could have been reached by the DVD Forum members regarding establishing standards for next generation discs• A compatibility
standard should have been introduced by Toshiba, NEC and Microsoft (HD-DVD) to satisfy Sony’s, Matsushita’s needs on the Blu-ray Disc sideYES!
Q2a: Was the outcome of the war predictable from the
beginning?
No
HD-DVD had a good chance of winning:
• Low manufacturing costs• Cheaper products• Flexibility to easily have HD and
conventional version on the same DVD
However, Blu-ray had a competitive advantage:
• Better product quality • Larger storage capacity• Added security• Higher availability
Q2b: When did Blu ray’s victory become inevitable?‐
Blu-ray’s victory was inevitable when Time Warner announced that they would no longer sell
movies in both formats and instead focus exclusively on Blu-
ray.
Best Buy, Netflix and Wal-Mart followed suit by dropping the HD-
DVD format.
Add the HD-DVD drive to
the console not just as an accessory.
Make a deal with
Blockbuster Inc. instead
Sony
More package promotions: • Retail stores• Bank
Do bundles: hardware and
software
Q3: What could Toshiba have done differently and could it have won?
Q4: To what extent was Sony a winner?
SONY was the hands down winner in this war• Leveraging Blu-Ray technology through game console business
• Complementary hardware• Multi media content producers
• Gain traction from competitors market share• Emerged as a virtual monopoly platform
Q5: Did Sony’s ultimate victory justify its unwillingness to reach a compromise with Toshiba during the first half of 2005?
Yes
It had a competitive
and comparative advantage
versus Toshiba.
Leading position in
the framework evaluation
INTELLECTUAL PROPERTY RIGHTS
ABILITY TO INNOVATE
FIRST-MOVER ADVANTAGE
CONTROL OVER INSTALLED USER BASE
BRAND NAME AND REPUTATION
MANUFACTURING CAPABILITIES
STRENGTH IN COMPLEMENTS
In-house installed base of content consumers
Dependence on outsourced installed base
Patent protection for the technology
Patent protection for the technology
Patent protection for the technology
Patent protection for the technology
Launched in 2006Launched in 2006
History of innovationHistory of innovation
Strong manufacturing baseStrong manufacturing base
Content and technology within the
same corp
8850 Billion ¥ brand8850 Billion ¥ brand
History of innovationHistory of innovation
7500 Billion ¥ brand7500 Billion ¥ brand
Technology with Toshiba, content outsourced
Strong manufacturing baseStrong manufacturing base
Launched in 2006Launched in 2006
Blu-RayBlu-Ray HD-DVDHD-DVD
Thank you for your attention.
Team 1
Sheikha + Jacek + Pablo + Ashish
The underlying assets , competitive advantages score card SONY 2- TOSHIBA 0
INHOUSE CONTENT DEVELOPMENT, DEPLOYMENT AND DELIVERY-SONY PICTURES and COLUMBIA PICTURES combine created and distributed content in house that ensured footfalls and introduction to their technology format.
INHOUSE COMPLEMENTARY PLATFORMS- SONY electronics produced BLU-RAY players internally and supported both the entertainment segment as well as the GAME CONSOLE segment.
SONY PICTURES and SONY ELETRONICS were both sister companies of the SONY Conglomerate, and could therefore exercise numerous flexible strategic options like transfer pricing, cross subsidization of costs, bundled offers etc.
TOSHIBA lacked the flexibility and complementarities of SONY and was therefore restricted in its strategic options to out flank SONY in the standards war.
COMMERCIAL CINEMA SEGMENT- Between 2003-2008, SONY PICTURES and COLUMBIA PICTURES Combine, by themselves produced and released a string of block buster movie hits globally. They developed a strong fan following, leveraging on the successes of these releases.
Note-This was over and above the list of movies released by production houses like Disney and FOX Studios.
GAME CONSOLE SEGMENT- By 2008, SONY PSP had sold 50 million units worldwide, and was leading MICROSOFT X-BOX, which was estimated to have sold 26 million units worldwide.
TOSHIBA lacked in having access to its own installed user base and was dependent on its partners to deliver the installed base to them to roll out their business plan.